mortgage

Young homeowners forced to stay put, says CIBC

Wednesday, September 10, 2014

Canadians are having a harder time moving out of starter homes, according to a new World Markets report from CIBC. National house prices have increased five per cent in 2014, with prices for mid to high-priced homes increasing at a greater rate than lower-priced options. As a result, many young homeowners are choosing to renovate rather than move.

“The value of bigger and pricier properties is rising notably faster than less expensive properties — widening the gap between starter home and dream house,” says Benjamin Tal, deputy chief economist at CIBC. “Regardless of what your starting point is, and by how much your property has appreciated, the desired move up target is getting further and further out of reach.”

The report notes that, between Q1 2010 and Q1 2014, the average price of a Toronto home in the $300,000-to-$500,000 range rose by approximately 28 per cent. Higher-priced homes increased even more dramatically during the same period, by between 40 and 50 per cent.

As moving presents affordability issues for many Canadians, existing home renovations become the next logical step, the report says.

“With limited move up options, it’s no surprise then that many Canadians choose to renovate their existing homes,” says Tal. “Over the past five years, spending on home renovations as a share of total residential investment averaged close to 46 per cent — by far the largest share on record. Renovation activity will remain robust and, in fact, might accelerate in the coming years.”

The home-ownership rate among Canadians aged 25 to 35 has fallen to 50 per cent, down five per cent from 2012.